Datt v. Wells Fargo Bank, N.A.

Background

Kanta and Ram Datt alleged that Wells Fargo and its predecessor institutions incorrectly processed their mortgage payments. They alleged that the error caused late-payment reporting, prevented them from refinancing in 2016, increased their interest and monthly payments, and resulted in additional penalties and fees. They ultimately refinanced with Chase Bank and alleged that the $750,388.68 paid to satisfy the loan was inflated because of the accounting error.

The Datts’ original complaint asserted fraud, violations of the Fair Credit Reporting Act (FCRA), violations of the Home Owners Loan Act (HOLA), and a request for punitive damages. Their proposed amended complaint asserted fraud, an FCRA claim, negligence, and a claim under California Business and Professions Code section 17200 et seq., along with a request for punitive damages.

Before bringing this federal action, the Datts had litigated related claims in state court. The state court granted summary adjudication on the fraud, section 17200, punitive-damages, and negligence claims, then dismissed the defendant with prejudice and entered judgment in its favor on all causes of action raised there.

Claims Previously Decided

The court applied res judicata, a rule that generally prevents parties from relitigating claims that were already decided, or claims that could have been raised, in an earlier case. It found that the proposed amended complaint was virtually identical to the state-court pleadings and arose from the same alleged mortgage-payment-processing error.

The court concluded that res judicata barred the fraud, negligence, section 17200, and punitive-damages claims. It determined that considering the defense was not improper because Wells Fargo asserted it after discovering the earlier state-court litigation, and allowing the defense would not cause undue delay or prejudice. Because amendment would be futile, the court granted the motion to dismiss as to those claims and denied leave to amend.

The opinion noted that Wells Fargo had not briefed whether res judicata also barred the FCRA claim. The court therefore did not decide that issue. The court separately stated that, to the extent the HOLA claim remained at issue, HOLA did not provide a private cause of action for the Datts’ claims, so that claim had to be dismissed with prejudice because amendment would be futile.

FCRA Claim

The FCRA generally requires a claim to be filed within two years after the plaintiff discovers the violation forming the basis for liability. The court rejected the Datts’ argument that the claim accrued anew each time they made a loan payment. It relied on precedent stating that the limitations period begins when the alleged violation is discovered.

The court found that the Datts’ complaint showed they discovered the alleged reporting or accounting error in January 2016. The alleged additional payments were injuries resulting from that original error, not new FCRA violations. The court therefore held that the FCRA claim had to be filed by January 2018. Because the Datts filed this action on March 6, 2019, the court held that the claim was time-barred and that amendment would be futile.

Disposition

Judge Edward J. Davila granted Wells Fargo’s motion to dismiss with prejudice, denied the Datts’ motion for leave to file an amended complaint, and directed the Clerk to close the file.